An extremist, not a fanatic

April 29, 2008

It's widely though that the government's efforts to compensate the low paid for the abolition of the 10p tax rate would be either complicated or expensive. But it needn't be so. There's one possible solution that's simple, revenue neutral, a benefit to the median voter, which would lift thousands out of the tax system, unite Labour MPs behind Gordon Brown, and probably cause Polly Toynbee to die of ecstasy.Step one would be to raise the personal income tax allowance by £1200. This would save all 20p tax-payers £240 a year (20% of £1200) - the amount lost by the biggest losers from the abolition of the 10p rate. This would cost £6.6bn, according to the Treasury's own estimates (pdf).This £6.6bn could be recouped by a 7p rise in the top tax rate.On top of its aforementioned benefits, this would cause the Tory party a problem. Brown could ask: "Are you serious about standing up for the poor or are you what you've always been - the party of the rich?" And he could justify the rise in top taxes more easily now than ever before. Something like this'll please Labour backbenchers:

This government is supporting the financial sector to an unprecedented degree, with a £50bn bail-out. It's only right that those who work in that sector should pay in some way for this state aid. What's more, the financial crisis that triggered this hand-out has shown that - in many cases - the justification for big salaries was only ever self-serving hogwash. Big earners in the City were not skillful judges of risk, helping to improve economic efficiency by cutting the cost of capital, but just ignorant punters who whine like five-year-olds who have pissed their pants the moment things go slightly against them. Higher taxes on these won't much damage the wider economy.

Of course, it's possible that a 7p rise in top taxes wouldn't raise as much as the Treasury thinks, if some top earners migrate (though not to New York) or downshift. But Brown could mitigate this danger by raising the top rate by less and raising the capital gains tax rate*.Whatever, the fact is that Brown has every chance to get out of his own mess in a way that'd delight Labour backbenchers and benefit most voters. So, what's stopping him? Is it the fear that top tax-payers are so footloose that they would migrate en masse? Or is he just more scared of the right-wing press than of his own MPs?* Corrected from earlier version in light of comment one.

April 28, 2008

I fear the media are exaggerating the costs of the strike at the Grangemouth oil refinery. The Times says:

BP has also shut its Forties pipeline system, which is powered by the plant,
25 miles to the west of Edinburgh. As the pipeline carries about 30 per cent
of Britain’s daily oil output from more than 70 oilfields in the North Sea,
the industrial action could cost Britain up to £50 million per day in lost
revenue.

This is surely wrong. If oil is not piped ashore today it's left in the ground, and can be piped ashore in future. Revenue losses occur only if oil prices fall from today's levels. This is of course highly possible, but by no means certain. Indeed, Hotelling's rule tells us that the least worst assumption to make about future oil prices is that they'll rise in line with current interest rates. On this view, the revenue losses - over time - will be nothing. What we lose today we'll get, with interest, in future.This helps explain why Ineos can afford to take a hard line. If it doesn't refine crude today, it can do so in future at (probably) higher prices and margins. Its losses are not today's production, but rather the maintenance costs incurred by cooling the refinery; cash flow losses - it has less immediate revenue with which to cover its big interest bill; and the risk of falling prices in the future. But these are probably smaller than the headlines about "lost" output.

April 27, 2008

Like Gracchi, I’m irked by Foreign Policy’s search for top public intellectuals. If we’re looking merely for the most influential living thinkers, surely Paul Samuelson, Frank Hahn and Kenneth Arrow - the founders of modern neoclassical economics - should be ahead of Steve Levitt or non-entities like Jacques Attali or Yegor Gaidar. And why on earth would Gary Becker, James Buchanan, John Roemer, Jon Elster, Alasdair MacIntyre or Ronald Dworkin, to name but the obvious few, not make the top 100?The problem is that Foreign Policy isn’t looking for merely great thinkers - as a glance at its list demonstrates. It wants ones who are “still active in public life.” But being active in public life and being an intellectual are, if not mutually exclusive, then at least very different things.To be very prominent in public affairs requires a dogmatism and capacity for soundbites that sits uneasily with the doubts and humble pursuit of “truth” that mark a true intellectual. And many proper intellectuals might reasonably shy away from the crude, ego-driven world of “public life.” As Macintyre said in concluding After Virtue, the task of intellectuals (and others) should be not to shore up the imperium, but to construct new forms of community in which civilized moral life can survive against the barbarism of our rulers.

April 25, 2008

Greetings from windy Rutland! And many thanks to all of you who wished me luck with the move. Matthew asks me a tricky question: would I be complimented to be called a Nietzschean last man?In some senses, the description fits, and not just because I’ve spent more time at Homebase than I should. I certainly share the last man’s eschewal of great wealth and power:

One no longer becomes poor or rich; both are too burdensome. Who still wants to rule? Who still wants to obey? Both are too burdensome.

And the last man’s interest in “merely” little things, far from being contemptible as Nietzsche claimed, is actually wholly admirable.So far, I’m proud to be a last man.However, I fear the Nietzschean dichotomy between the last man and the “overman” misdescribes today’s world.Nietzsche thought that last men were an undifferentiated mass - “Everyone wants the same; everyone is the same” - whilst the overman strove to be different.But this is the exact opposite of what we see today. It’s the men who seek power and great wealth who are all the same - with their utilitarian morality and managerialist ideology - but it’s the men who retreat from worldly acclaim who are all different in their tastes, moralities and interests. And this is where Nietzsche is a lousy sociologist. He thought the overman could both create his own morality and achieve worldly power. But perhaps the two are incompatible. It‘s the men who seek power who are, in fact, slaves to contemporary mediocre morality. It’s the people who have renounced power and ambition who are free to pursue other, higher, moral goals.

* The picture is of Egleton church, taken on my afternoon constitutional.

April 14, 2008

This morning, for perhaps the last time, I walked to the top of Primrose Hill. I looked down upon London and asked: do I really want to leave all this?Yes. Non-natives don't live in London for the amenities; this doesn't make sense in cost-benefit terms. Instead, they do so to earn money, to "get on". But even those who succeed in this lose something more valuable than money - their freedom. One of the mistakes vulgar libertarians make is to believe that it's only the state that restricts freedom, when in fact we can be enchained by our own past deeds and character. And many - maybe most - quite rich men are so enchained. Some are trapped by ex-wives or school fees, others by expensive tastes in cars, yachts, wine or drugs. And others are imprisoned by their own ego. Many want a top job not because they need the money, or because it's an enjoyable thing to do - it's generally not - but because the feeling that they have climbed to the top of the ladder gratifies their self-esteem; this is why politics and office politics are often so bitter - they are about character, not money.In leaving London, I'm leaving all this and seeking - and expressing - freedom. Of course, I'll still have to work. But in working from home, it'll be proper work, done for its own sake and not as a means to climb any ladder. This is not a question of improving the "work-life balance". The very phrase captures one of the evils of capitalism - that work and life are opposites. Instead, it's about integrating work into life; in not having to travel into an office, I'm smashing one of the big dividing walls between the two, and moving towards the Marxian ideal of unalienated labour.Which is another way of saying blogging will be light for the next few days, as I metamorphose from an urbane metropolitan liberal to a petty-minded provincial. My next post will, insha'Allah, be from Oakham.

One of my favourite quotes is that of Kenneth Boulding: "All organizational structures tend to produce false images in the decision-maker." Two recent examples show his point.First, Jack Straw "has let it be known" (as journos say) that he has doubts about Brown's plans to bang up Muslims for 42 days without charge, but plans to vote for the measure anyway.In doing this, Straw was probably thinking that this was a way to placate both his constitutents and the PM. But in fact, we just think: "what a slimy duplicitous unprincipled little bastard - Ed Balls is right for once."Then there's this letter to the Times from one Alastair Campbell praising Terminal 5.When we read this, do we think: "T5 isn't as bad as thought"? No. We think: "This is the Alastair Campbell who worked with Tom Kelly in Downing Street, probably using him to do his dirty work. And Tom Kelly is now head of PR at BAA. So Campbell's just returning a little favour." But neither Straw nor Campbell seem aware of these reactions. Instead, they persist in the idiotic illusion that we believe what they say. They don't realize they have negative credibility - many statements only become plausible once the likes of Campbell and Straw deny them.And here's what puzzles me. Why do they continue to do this? Is is because they're too thick to realize what the public think of them? Or is that they know but have become so corrupted by power that they just don't care? Or is that that they do know and do care, but just have no idea how to behave differently?

April 13, 2008

Like Max Mosley, I have a shameful secret - mine is that I like Will Hutton. But by crikey, he writes some pish doesn’t he? Tim’s already had a pop at this, but there’s plenty left. Like this:

The blight [of falling house prices] hits everyone. The most tragic are those whose houses are repossessed, but most of the suffering is hidden. People are trapped and have to put their lives on hold because they cannot move because the housing market is seizing up: the newly retired couple who plan to move out to the country; the woman who wants to move closer to her new job; the family that wants to be nearer a school. Everybody has to abandon or defer their plans.

This is only part of the story. There are also many people for whom lower house prices are a good thing: the prospective first-time buyer who hopes to buy a place; the young family hoping to get a bigger house as their children grow; the people who traded down at the peak of the market; the older home-owners who no longer have to give their children a fortune as a deposit on a flat; the man whose ex-wife copped for the house. And even home-owners gain from falling prices, in the sense that the opportunity cost of living at home (thus foregoing rent) falls. As Willem Buiter said, houses are not net wealth. Or take five other perspectives:1. Many men have borrowed thousands of pounds to buy an asset that’s fallen in price. We call them car-owners. No-one worries about negative equity in the car market. So why worry about negative equity in another consumer good?2. Sure, some people have lost money because they over-invested in housing. But why should we care about these any more than about those who over-invested in Laughing Boy in the 3.30 at Wincanton? It’s not the government’s job to bail out bad gamblers.3. I’ll grant that some people are “trapped” in their existing home. But this is because capitalist presenteeism forces people to live nearish to where they work. But the problem here is the repressive nature of capitalism, not the housing market.4. Correlation is not causality. The belief that falling house prices are a bad thing arises from memories of the 1990s recession, when falling prices were associated with rising unemployment and repossessions. But this confuses cause and effect. It was rising unemployment that caused house prices to fall. It’s far from clear that a fall in house prices will have such ill-effects if the labour market remains healthy.5. Wouldn't it be better for us all if people wanting to get rich were forced to ask: "how can I provide a useful service to others?" rather than just buy a house and wait.Now, you might object here that I’m taking an overly sanguine view because I traded down near the peak of the market. But then, mightn’t Will be taking an overly gloomy view because his missus is a property developer?

Hopi Sen opens a can of worms: what should the left do about family breakdown?In one sense, there’s not much policy can do. As Hopi says, dysfunctional families are centuries old. And they are not confined to the underclass; countless well-off people identify with Bree’s remark: “We might as well sit on the porch and play banjos.”There is, though, one thing that could be done - stop giving people an incentive to have children. The tax-payer spends over £15bn a year in child benefit and tax credits - and that‘s before the billions we spend failing to educate kids and on the police and prison service for picking up the mess.One result of this is that a single person on a full-time minimum wage gets an income of £72 a week more if she has a child than if she doesn’t - and, indeed, would be £6 a week better off even if she gave up work to have a kid.There are three arguments against such subsidies:1. At the margin, they give people an incentive to have children. And the marginal parent is likely to be a bad parent. One lesson of the Shannon Matthews affair is that even people who are long odds to win the economics Nobel respond to incentives. 2. There’s no good leftist principle that requires the tax-payer to write blank cheques to people who get into messes of their own choosing. We should be helping those who can’t help themselves - the low-skilled, the unlucky, but not parents.3. Having children is not a right, but rather a burden one imposes upon others - it‘s not as if the country is under-stocked with people. And if one is going to impose such a burden, one should pay the price, not get a subsidy. On this point, John Stuart Mill was - as usual - more clear-headed than most liberals:

To bring a child into existence without a fair prospect of being able, not only to provide food for its body, but instruction and training for its mind, is a moral crime, both against the unfortunate offspring and against society; and that if the parent does not fulfil this obligation, the State ought to see it fulfilled, at the charge, as far as possible, of the parent…The fact itself, of causing the existence of a human being, is one of the most responsible actions in the range of human life. To undertake this responsibility--to bestow a life which may be either a curse or a blessing--unless the being on whom it is to be bestowed will have at least the ordinary chances of a desirable existence, is a crime against that being. And in a country either over-peopled or threatened with being so, to produce children, beyond a very small number, with the effect of reducing the reward of labour by their competition, is a serious offence against all who live by the remuneration of their labour. The laws which, in many countries on the Continent, forbid marriage unless the parties can show that they have the means of supporting a family, do not exceed the legitimate powers of the State.

You might object that this is hard-hearted. Perhaps it would be excessively so if child subsidies were to be withdrawn immediately, as opposed to new claims being stopped. Or one might wonder where it leaves the government’s target of abolishing child poverty. Well, I’ve never been clear what’s wrong with child poverty as distinct from bad parenting - indeed, there’s something to be said for it. I suspect the left’s concern with child poverty owes more to soft-headedness - “think of the ickle-wickle kiddie-widdies” - or to a desire to bribe median voters than to serious moral thinking.And wouldn’t the billions saved on throwing money at the likes of Karen Matthews be better spent on improving fostering and adoption services, better schools in poor areas or upon early years education such as Sure Start?

April 11, 2008

Cricketers who play regularly for England tend to live longer than those who make only a few appearances, a study has shown. Research by the University of St Andrews reveals that cricketers who represented their country more than 25 times lived on average almost five years longer than those who played only a handful of Test matches. (Via Norm.)

This is consistent with two other findings - that Nobel prize winners live longer than mere nominees, and that Oscar-winning actors live longer than those who were nominated but never won (though this might not be statistically significant.)What’s interesting here is that this effect seems independent of wealth and ordinary socio-economic status. The Nobel effect exists controlling for wealth. And Nobel nominees, actors with good careers, and men who play only a few tests (and some combine two of these), are by any objective standards, much more successful than the average. Many of us would give our right arm to play just once for England. Some have given the impression of having done just this.This effect is also a different one from the finding of the Whitehall studies (pdf) showing that senior civil servants live longer than junior ones. That effect might be due to inequalities in power and control over one’s life. But there are no significant differences in power between cricketers with long test careers and short ones, or between nominees and winners of Nobels and Oscars.So what’s going on here? One obvious possibility is that status and high acclaim boost health.But there’s a finding which speaks against this - screen-writers who win Oscars seem to have shorter lives than mere nominees.So, here’s a theory. One thing that matters for longevity is having friends. Most prize-winners are more like to attract these, ceteris paribus, than nominees. However, because their work is naturally solitary, Oscar winning writers don’t benefit from having more company - indeed, they actually lose it, because they tend to work more than non-winners.So, maybe the message here is not that we should invest time pursuing career success, but rather that we should focus on making friends.

April 10, 2008

Norm asks: "does it even make sense in an economist's terms to write as if there
are no significant benefits from education in, broadly, the humanities?"One answer is in tables 7a and 7b of this paper. It shows that young men with degrees in arts and humanities earn 10% more than men without degrees, whilst women with such degrees earn 30% more than non-graduate women; the difference is partly because non-graduate women earn less than men.In this sense, arts education pays even in the most philistine economistic sense. Indeed, the chief executives of three of the UK's biggest banks - Stephen Green at HSBC, John Varley at Barclays and Andy Hornby at HBOS - all read humanities: PPE, history and English respectively. However, these returns to degrees come only if graduates can get graduate jobs. And the proportion that do so has fallen in recent years - to just two-fifths for men. And arts graduates - men and women- who don't get graduate jobs earn no more than non-graduates. Mind you, male science graduates who don't get graduate jobs do even worse.So, if you can get a graduate-level job, there are financial pay-offs to humanities education, especially for women.